ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) has greenlighted an additional surcharge of Rs1.52 per unit monthly on K-Electric electricity bills. It aims to collect Rs24.5 billion from Karachiites over 12 months, starting from December 2023.
NEPRA has conveyed this decision to the federal government for notification in the official gazette. The surcharge will be applicable to K-Electric users upon notification, excluding lifeline consumers. A motion submitted by the federal government on July 19, 2023, prompted NEPRA to impose this surcharge to recover the specified amount from Karachi consumers. Notably, the request relates to the recovery of a surcharge for K-Electric and covers a three-year-old collection. A decision on quarterly adjustments was made in May 2019, but its implementation was deferred due to the Covid-19 pandemic, unlike other distribution companies that implemented the quarterly adjustment.
On August 15, 2023, a public hearing held by the power regulator deliberated on the federal government’s request for implementing a consumer-end tariff recommendation for K-Electric. Despite being labelled as a quarterly adjustment, NEPRA Member Rafiq Shaikh questioned the use of the term “surcharge” during the hearing. Power Division officials clarified that legal complexities in retroactively recovering the amount led to the adoption of the term “power surcharge.” According to a letter from the Ministry of Energy on October 25, 2023, the proposed surcharge is intended to address outstanding amounts, totalling Rs1,671 billion for power producers and Rs765 billion for Power Holding Limited as of September 30, 2023.
The Ministry, in the proceedings, said that over the past five years, K-Electric’s subsidy amounted to approximately Rs416 billion. Similarly, for FY2023-24, the government budgeted a subsidy of Rs976 billion for the Power Sector, including Rs298 billion for K-Electric. In an additional note attached to the decision, a member of NEPRA discussed the proposal to impose the Rs1.52/kWh surcharge on Karachi Electric (KE) consumers to meet the federal government’s financial commitments towards Independent Power Producers (IPPs) and Power Holding Limited.
It questions the wisdom of collecting revenue through surcharges and highlights the burden on consumers and potential negative impacts on the power sector and the country’s economy. The note emphasizes the need to find sustainable solutions for the power sector’s development and economic progress.
It also reveals that KE has unpaid subsidy claims due to its higher tariff, primarily from relying on thermal sources instead of renewable energy (RE). Despite directives from NEPRA to increase renewable energy (RE) in its portfolio, KE’s requests for proposals for RE power plants have been pending for over two years. The delay contributes to higher tariffs and subsidy differentials, leading to increased payables for IPPs and Power Holding Ltd.
The note urges a timely decision on requests for proposals to reduce the government’s tariff differential subsidies and KE’s overall revenue requirement, limiting the need for surcharges.